PORTFOLIO INSIGHT


ground meeting with company manage- ment teams and industry experts in local frontier countries. Just last week, for exam- ple, two of my analysts were in Rwanda and Kenya meeting companies, and another was in Nigeria. This week two of the team are in Saudi Arabia, the UAE and Kuwait.


ground in countries such as Kuwait, Viet- nam and Nigeria if you are sitting in an office in London? At T. Rowe Price, we have one of the largest in-house research teams in the industry. Myself and six analysts primarily focus on the countries and companies in frontier markets. We are embedded within a global emerging mar- kets team of approximately 35 professionals that provides additional resource. In Eastern Europe, for example, we have analysts looking at Romania and Georgia in addition to my own direct team. This gives us a comprehensive coverage of these compa- nies and countries.


In addition, we have a fixed income team where our sovereign analysts look at every country, at both the macro and the political level, which helps us form a holistic view of each and every country and company. But there is no substitute for getting out into the region. Our size and scale mean that we can spend much of our time on the


How are your preparing your portfolio for the election in Argentina? We currently have zero allocation to Argen- tina. There has been a material change recently as President Macri suffered a resounding loss in August’s primary elec- tions, which leaves his chances of winning the upcoming presidential election slim. Ex-president, Cristina Kirchner, is the run- ning mate to the now likely winner, Alberto Fernandez. This raises concerns for us about capital controls and socialist and pop- ular agendas. Argentina cannot afford to go down that route in this point in time, in our


generally not being reflected in the market, particularly in financials which accounts for a large part of the opportunity set. Here valuations look compelling given the fun- damentals, returns on equity and growth being generated.


In your view, why is now a good time to consider an allocation to frontier markets? Over the past couple of decades, many fron- tier markets have made huge economic strides, as economies and capital markets liberalised. Despite this, the frontier asset class remains undercapitalised and under- owned. While the potential magnitude of frontier growth is not reflected in the scale of the current stock market capitalisation, we expect this to change over the coming years.


Adding frontier exposure


can provide significant portfolio diversification benefits.


view. The outlook is pretty binary at this point: it could tailspin, but if Macri wins that would be positive.


What is your view on current valuations in the market? Valuations across frontier markets are extremely attractive in our view. The growth and fundamentals of most of these compa- nies and countries continues, but this is


Important Information This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. Past performance is not a reliable indicator of future performance.


In our view, this is an asset class that you should always buy contrarily. Frontier has been largely out of favour for about five years, as evidenced by negative investor flows over that time. That tells you that there is no hot money. It has not been for- gotten, but it does seem to be on the back burner. You do not want to be investing in frontier when it is hot and up 30% to 40%. You want to be buying when no-one is talking about it because it will most likely move fairly aggressively if and when investors acknowledge the fundamentals.


Issue 87 | October 2019 | portfolio institutional | 27


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7